Method, apparatus and interface for transaction toggling

ABSTRACT

A method for submitting transactions from an automated trading tool to an electronic exchange. The method includes defining a proximity limit and automatically generating a transaction for a tradeable object. The method further includes applying the proximity limit to the transaction. When the transaction falls within the defined proximity limit, the transaction is submitted to the exchange. An apparatus and interface for transaction toggling based on proximity limits are also provided.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.12/914,231, filed on Oct. 28, 2010 which is a continuation of U.S.patent application Ser. No. 12/838,631, filed on Jul. 19, 2010, now U.S.Pat. No. 7,849,001, which is a continuation of U.S. patent applicationSer. No. 10/330,464, filed on Dec. 27, 2002, now U.S. Pat. No.7,792,734. The entire disclosure contents of these applications areherewith incorporated by reference into the present application.

FIELD OF THE INVENTION

The present invention is generally directed to electronic trading, andin particular, facilitates trading of any tradeable object in anelectronic trading environment.

BACKGROUND

Trading methods have evolved from a manually intensive process to atechnology enabled, electronic platform. Advances in technology arehaving an increasingly large and broad impact on trading and the way inwhich exchanges conduct business. What was previously seen as just asupplement to the traditional pit trading, electronic trading platformscontinue to increase in importance and popularity. The advent ofelectronic trading has meant that a customer can be in virtually directcontact with the market, from practically anywhere in the world,performing near real-time transactions, and without the need to makepersonal contact with a broker. Electronic trading systems are alsoconvenient for floor brokers on the floor at an exchange for receivingorders electronically.

Exchanges and auction houses that support electronic trading aregenerally based on a host, one or more computer networks, and clients.In general, the host includes one or more centralized computers to formthe electronic heart. Its operations typically include order matching,maintaining order books and positions, price information, and managingand updating a database that records such information. The host is alsoequipped with an external interface that maintains uninterrupted contactto the clients and possibly other trading-related systems.

Typically, market participants link to the host through one or morenetworks. A network is a group of two or more computers that are linkedtogether. There are many types of networks such as local area networks(LANs) and wide area networks (WANs). Networks can also be characterizedby topology, protocol, and architecture. However, any type of networkconfiguration, including LAN/WAN combinations, can be used in electronictrading. For example, some market participants may link to the hostthrough a direct connection such as a T1 or ISDN. Some participants maylink to the exchange through direct connections and through other commonnetwork components such as high-speed servers, routers, and gateways,and so on. As another example, the Internet can be used to establish aconnection between the client and the host. There are many differenttypes of networks, and combinations of network types, known in the artthat can link market participants to the host.

Regardless of the way in which a connection is established, softwarerunning on the clients, or a server supporting the clients, allowspeople to log onto one or more exchanges and participate in one or moremarkets. A client is a terminal or computer that accesses one or morenetworks. For example, a client can be a personal computer, laptopcomputer, hand-held computer, workstation and so on. Some clients runsoftware that creates specialized interactive trading screens. Ingeneral, the trading screens enable people to enter orders into themarket, obtain market quotes, and monitor positions. The range andquality of features available varies according to the specific softwareapplication being run.

Trading software may also create specialized interactive tradingscreens. The trading screens enable the traders to enter orders, obtainmarket quotes, monitor positions and receive fill information, while thetrader implements various trading strategies, including those previouslyused on the floor of an exchange. Such strategies incorporated into anelectronic marketplace may improve the speed, accuracy, and ultimatelythe profitability of trading electronically. One such trading strategyis spread trading.

Spread trading is the buying, selling, or combination of buying andselling, of two or more tradeable objects, the purpose of which is tocapitalize on changes or movements in the relationships between thetradeable objects. A spread trade may involve buying two or moretradeable objects, buying one or more tradeable objects and selling oneor more tradeable objects, selling two or more tradeable objects, orsome combination thereof. For example, the tradeable objects beingspread may be contracts for different delivery months (expiration dates)of the same tradeable object, or contracts of the same tradeable objectat different strike prices. But spread trades sometimes involvedifferent tradeable objects or the same tradeable object on differentexchanges.

Spread trading is usually less risky than other types of tradingstrategies such as position trades, because a position is protectedwhere an investment is made by taking an offsetting position in arelated product in order to reduce the risk of adverse price movements.For example, a trader might simultaneously buy and sell options of thesame class at different strike prices and/or expiration dates. Ofcourse, there are many other reasons for spread trading, and there aremany known varieties of spread trading techniques.

With the advent of electronic trading, trading strategies such as spreadtrading can be incorporated into the electronic marketplace. However,the success of a trader who trades in a competitive electronic tradingenvironment may depend on many factors. Among those factors are thespeed in calculating what tradeable objects to quote, the speed incalculating what price to quote at, and the speed in calculating howmuch to quote. Because speed is of great importance, it is desirable forelectronic trading systems to offer tools that can assist a trader intrading in an electronic marketplace, and help the trader to make tradesat the most favorable prices in a speedy and accurate manner.

Sometimes traders also use a separate spreadsheet program or anothersimilar program to receive market data feeds and to generate numbers,based on those feeds, which the traders can use to determine whether tobuy and/or sell tradeable objects. Then, in response to the generatednumbers, the trader can manually enter and execute orders into a tradingapplication. Instead of manual order entry, some traders use a morebrute force approach with often limited flexibility by linking aspreadsheet program directly to a trading application. Orders are thenautomatically entered and executed by the trading application based onthe generated numbers. Use of spreadsheets and trading applications inthis manner does allow traders to enter orders raster than usingtraditional methods of order entry and execution.

However, to profit in today's rapidly moving markets, traders must beable to react more quickly and assimilate an enormous amount of data.For example, a trader may have to assimilate market data, world news,business news, and so on before making trades. Consequently, a skilledtrader with the quickest software, the fastest communications, and themost sophisticated analysis can significantly improve the trader's ownor the trader's firm's bottom line. The slightest advantage in speed orability to assimilate information can generate significant returns in afast moving market. Therefore, in today's fast and dynamically changingmarkets, a trader lacking a technologically advanced interface is at asevere competitive disadvantage. Prior use of such programs is still aninadequate solution to handle the dynamics of such a fast moving market.

BRIEF DESCRIPTION OF THE FIGURES

The presently preferred embodiments are described herein with referenceto the drawings, in which:

FIG. 1 shows an example host exchange, gateway, and client device thatimplements the trading of tradeable objects;

FIG. 2A is an example of a trading window 200 for spread trading;

FIGS. 2B and 2C are trading windows for the tradeable objects, or legs,underlying the spread illustrated in FIG. 2A; and

FIGS. 3A through 3C illustrate the use of a proximity limit for quotetoggling.

DETAILED DESCRIPTION

In accordance with the presently preferred embodiments, tools areprovided to assist a trader in limiting the number of transactions,e.g., orders, quotes, etc., submitted in an electronic tradingenvironment. In this context, a trader is anyone who participates intrading tradeable objects. A tradeable object, as that term is usedherein, refers simply to anything that can be traded with a quantityand/or price. It includes all types of tradeable objects, including butnot limited to financial products, which can include, for example,stocks, options, bonds, futures, currency, and warrants, as well asfunds, derivatives and collections of the foregoing, and all types ofcommodities, such as grains, energy, and metals. The tradeable objectmay be “real,” such as products that are listed by an exchange orauction house for trading, or “synthetic,” such as a combination of realproducts that is created by a trader or other user. The presentembodiments, which generically may be referred to herein as a“transaction toggler,” are provided to facilitate automated trading andare, in addition, particularly suitable for the automatic trading ofspreads. Other applications for the transaction toggler, however, willbe apparent from the following detailed description.

In the following sections of this detailed description, an overview ofan electronic trading network is presented, followed by an illustrationof spread trading over the electronic trading network. Next, thetransaction toggling method is described. An embodiment of an interfacefor use with the transaction toggling method is thereafter presented.Finally, some alternative embodiments are described.

1. General Overview of an Electronic Network

FIG. 1 shows an example host exchange, gateway, and client device thatimplements the trading of tradeable objects. In a typicalimplementation, the system generally includes a host exchange 100, agateway 102, and a client device 104. Preferably, the system can supportup to X host exchanges, Y gateways 102, and Z client devices (although Xhost exchanges, Y gateways, and Z client devices are not shown for sakeof clarity), where X, Y, and Z represent any number. In an illustrativeembodiment, X and Y may be the same number such that there is aone-to-one correspondence between host exchanges 100 and gateways 102,but such numerical correspondence is not required. In addition, as willbe recognized by those skilled in the art, a single physical structure(e.g., a server) may, with appropriate programming/firmware, serve asmultiple gateways.

Examples of host exchanges 100 include an Electronic CommunicationNetwork (ECN) like Island, which is a well-known electronic tradingfacility. Another host exchange 100 might be, for example, the ChicagoMercantile Exchange (CME), the Xetra (a German stock exchange), or theEuropean derivatives market (Eurex). The preferred embodiments are notlimited, however, to any particular exchange, and it should beunderstood that any entity that provides electronic market information,accepts electronic orders, and/or provides order status information mayfunction as the host exchange. For example, the host exchange 100alternatively may be an electronic auction house.

As known in the art, the gateway 102 is one or more computers (orprogram(s)) running software that receives information from the hostexchange in the form of price information, order information, and fillinformation. Also known in the art, the client device 104 is a computer,workstation or equivalent device that receives one or more data feedsfrom the gateway 102. The host exchanges 100, gateways 102, and clientdevice 104 are explained below in their respective sections.

FIG. 1 illustrates one particular network arrangement among manyconfigurations that are known to those skilled in the art. It should beunderstood that the preferred embodiments are not limited to anyparticular network architecture, but rather may be applied with utilityon any electronic device in any network that can be used for electronictrading. Furthermore, the preferred embodiments are not limited to acompletely electronic trading environment where orders are sent to anelectronic matching engine. For example, the invention could be utilizedwith an electronic trading application that sends orders electronicallyto a terminal where a person (e.g., a floor broker) executes orrepresents those orders in a traditional open outcry trading floor.

Host Exchange

Each different host exchange 100 typically provides different types ofinformation, and relays this information, or some portion thereof,collectively referred to as a data feed, over a network to marketparticipants or traders. A data feed from one exchange may containdifferent information, e.g. representing different tradeable objects,than another data feed from a second exchange. Different host exchangesmay also provide different amounts of information, e.g. market depthaway from the inside market, and may provide information in differentformats. However, it is not necessary in the preferred embodiments thatthe data feeds from exchanges either include the same data or differentdata.

In general, a data feed 106 may include information representing pricesand/or quantities for a tradeable object. For example, for a futurescontract the data feed 106 could include data relating to the “insidemarket” and/or data relating to “market depth.” The inside market is thehighest bid price and the lowest ask price available in the market. Datafeeds 106 from some exchanges also include data corresponding toquantities available at the inside market prices and at otherprices—this may be called the market depth. Market depth may berepresented by the available order book, including all the current bidand ask quantities and their associated prices, or any portion thereof.In other words, market depth is at least a portion of the availablepending bid and ask quantities entered at a particular price. The datafeed 106 can contain other types of market information, such as the lasttraded price (LTP), the last traded quantity (LTQ), total tradedquantity (TTQ), order information, and/or fill information. Theinformation in a data feed 106, whether it contains the inside marketand/or market depth or more market information, is generally categorizedinto three groups referred to as price, order, and fill information.

In one embodiment, each host exchange 100 sends a data feed 106 to agateway 102. The data feed 106 preferably carries all of the informationthat the exchange 100 provides, such as price, order, and fillinformation, and alternatively may include more information. The hostexchange 100 may send its data feed 106 to the gateway 102 over adedicated line 108, which is a communication channel that permanentlyconnects the exchange to the gateway. Dedicated lines may be private orleased lines such as T1 lines, which are known by those skilled in theart. Or alternatively, the host may send its data feed to the gatewayover a switched network such as a wide area network (WAN), Internet,PSTN, legacy networks that utilize X.25 protocol or also IBM LU6.2 SNAprotocol, satellite broadcast systems that use leased satellite channelsto broadcast price data, or a packet switched network, such as ATM orFrame relay, which are connection methods known by those skilled in theart. As noted above, the preferred embodiments are not limited to anyparticular network architecture. The foregoing examples are providedmerely to illustrate the wide variety of networks to which the preferredembodiments may be applied.

According to the embodiment of FIG. 1, if there were five exchanges,then each exchange may have an associated gateway, and then according tothis example there would be five gateways (i.e., X=Y). When a traderwants to participate in the market at two of the five exchanges, he orshe may subscribe only to the data feeds that correspond to those twoexchanges. If the trader decides to drop one of the exchanges or addanother exchange, he or she may preferably do so at any time.

In another embodiment, each host exchange sends a data feed to a singlegateway. For example, if there were five exchanges, then each exchangewould send its data to the single gateway. Then, when a trader wants toparticipate at two of the five exchanges, he or she can simply subscribeto the data feeds that correspond to those two exchanges at the gateway.Also, if the trader decides to drop one of the exchanges or add anotherexchange, he or she may do so at any time. Of course, a hybrid system,in which multiple exchanges share a single gateway while other exchangesutilize distinct gateways, may alternatively be used.

In yet another embodiment, some exchanges may have multiple gateways, sothat if there were five exchanges, then there might be three gatewayssupporting each of them; for fifteen gateways. This embodiment allowsfor a load balancing, among other benefits, of the gateways'workstations.

The preferred embodiments are not limited to any particular mathematicalrelationship between the number of host exchanges and the number ofgateways. Those skilled in the art will appreciate that any of theforegoing examples, as well as combinations of these examples orentirely different architectures, may alternatively be used.

Gateway

As mentioned earlier, the gateway 102 is a computer (or program) thatreceives information from the host exchange. As used herein, a computerincludes any device with memory and a processor capable of processinginformation to produce a desired result. Thus, a gateway can be acomputer of any size such as a server, workstation, personal computer,or laptop, but generally, the gateway is any computer device that hasthe processing capability to perform the function described herein.Moreover, it should be understood that the functions of the gatewaycould be moved to the exchange and/or the client device to reduce oreliminate the need for a gateway.

In one embodiment, the gateway 102 receives a data feed 106 from anexchange 100. Preferably, the gateway 102 receives the data feed 106 andconverts it to a form compatible with the protocols used by the clientdevice 104 using conversion techniques known in the art. As known bythose skilled in the art, the gateway 102 may have one or more serversto support the data feeds, such as a price server 114 for processingprice information, an order server 116 for processing order information,and a fill server 118 for processing fill information. Generally, aserver is a computer or program that responds to commands from a clientin the form of subscriptions. The “servers” here may run on the samemachine or may run on independent machines. A trader at a client devicecan subscribe to price information, order information, and fillinformation for that exchange. Once a client device has subscribed tothe information, the gateway 102 publishes the information to the clientdevice 104.

Client Device

As mentioned before, the client device 104 may be a computer orequivalent device, such as a workstation, that allows a trader toparticipate in the market hosted at the exchange. The client device 104is not limited to any particular hardware and/or software, but rathermay be any device that is capable of communicating with an exchange 100.For example, the client device 104 may be a personal computer, terminal,workstation, personal digital assistant (“PDA”), smart phone, or anyother wired or wireless communication device.

In general, the client device uses software that creates specializedinteractive trading screens on a terminal associated with the clientdevice. The trading screens enable traders to enter and execute orders,obtain market quotes, and monitor positions. The range and quality offeatures available to the trader on his or her screens varies accordingto the specific software application being run. In addition to or inplace of the interactive trading screens, the client device may runautomated non-interactive types of trading applications.

A commercially available trading application that allows a user to tradein a system like that shown in FIG. 1 is X_TRADER® from TradingTechnologies International, Inc. of Chicago, Ill. X_TRADER® alsoprovides an electronic trading interface, referred to as MD Trader™, inwhich working orders and/or bid and ask quantities are displayed inassociation with a static price axis. The preferred embodiments,however, are not limited to any particular trading application thatperforms the translation, storage and/or display functions. Portions ofthe X_TRADER° and the MD Trader™-style display are described in U.S.Pat. No. 6,772,132, entitled “Click Based Trading With Intuitive GridDisplay of Market Depth,” issued on Aug. 3, 2004, U.S. Pat. No.6,938,011, entitled “Click Based Trading With Market Depth Display,”issued on Aug. 30, 2005, and U.S. Pat. No. 7,127,424, entitled “ClickBased Trading With Intuitive Grid Display of Market Depth and PriceConsolidation,” issued on Oct. 24, 2006, the contents of each of whichare incorporated by reference herein. Moreover, the trading applicationmay implement tools for trading tradeable objects that are described inU.S. Pat. No. 7,389,268 issued on Jun. 17, 2008, entitled “Trading Toolsfor Electronic Trading,” the contents of which are incorporated byreference.

2. Spread Trading

As noted above, spread trading is the buying, selling, or combination ofbuying and selling, of two or more tradeable objects, the purpose ofwhich is to capitalize on changes or movements in the relationshipsbetween the tradeable objects. A system and methods for performingautomatic spread trading are described in U.S. Pat. No. 7,437,325,issued Oct. 14, 2008, the contents of which are incorporated herein byreference. In conjunction with the system and methods for performingautomatic spread trading, U.S. Pat. No. 7,437,325 shows a trading windowfor spread trading and describes how the trading window may beconfigured and generated. It also describes how the trading window ispopulated with market data related to the spread and updated as themarket moves with time.

FIG. 2A is an example of a trading window 200 for spread trading. Thetrading window 200 includes a working order column 202 to illustrate atrader's working orders in association with a price axis 204. In thisexample, the trader has a working order 206 to buy 5 of the spread at aprice of 0.860. At least a portion of the pending orders in the marketfor the spread is also illustrated in this example. Specifically, thetrading window 200 includes a bid quantity column 208 and an askquantity column 210, which contain numerical indicators, in thisexample, for bid and ask quantities, respectively. As illustrated inFIG. 2A, the numerical indicators in the bid quantity column 208 and theask quantity column 210 are displayed in association with acorresponding price level on the price axis 204.

As shown in U.S. Pat. No. 7,437,325, the price and quantity datadisplayed in columns 204, 208 and 210 may be derived from data feedsfrom one or more host exchanges 100. In particular, the spread data iscalculated based on data associated with two or more tradeable objects,where the data associated with the two or more tradeable objects issupplied by one or more host exchanges. Each tradeable object that isincluded in the spread may be referred to herein as a “leg” of thespread.

FIGS. 2B and 2C are trading windows 212, 214 for the tradeable objects,or legs, underlying the spread illustrated in FIG. 2A. Trading window212 presents market data for the first leg of the spread, Product A, andtrading window 214 presents market data for the second leg of thespread, Product B. Like the trading window 200, the trading windows 212and 214 include a price axis 216, a working order column 218, a bidquantity column 220 and an ask quantity column 222.

When a trader enters the working order 206 in the spread trading window200, corresponding working orders may be entered in the legs based onthe spread configuration. In the two-legged spread example shown inFIGS. 2A through 2C, the automatic spreader enters corresponding workingorders 224 and 226 in response to the trader's entry of the workingorder 206. Based on the spread configuration, a buy order 224 was quotedfor Product A in trading window 212 and a sell order 226 was quoted forProduct B in trading window 214. In this case, the buy order is quotedfor 5 of Product A at a price level of 105.08, and the sell order isquoted for 5 of Product B at a price level of 104.30. FIGS. 2A-2Cillustrate an example of quoting both legs of the spread, butalternatively, the automatic spreader may quote only one of the legs, ormore than two legs. The number of legs that are actively quoted by theautomatic spreader preferably depends on the user's spreadconfiguration.

It should be understood that the trading windows 212 and 214 may or maynot be displayed. Preferably, the user may decide whether or not todisplay the trading windows 212 and 214. For example, the user maydesire to see where, in relation to the inside market, the workingorders in the legs are entered. As another example, the user may desireto trade Product A, as well as the spread, and would therefore benefitfrom the display of a trading window for Product A.

As expressed earlier, the MD_TRADER™-style screen displays of the typeillustrated in FIGS. 2A through 2C are described in theabove-incorporated patents entitled “Click Based Trading With IntuitiveGrid Display Of Market Depth,” “Click Based Trading With Intuitive GridDisplay of Market Depth and Price Consolidation,” and “Trading Tools forElectronic Trading.” It should be understood, however, that thepreferred embodiments are not limited to this, or any other, particulartype of screen display. Rather, the preferred embodiments may be readilyadapted by those skilled in the art to a wide variety of screen displaysand trading interfaces.

3. Transaction Toggling

Automatic trading tools often re-quote orders based on market movements.For example, the automatic spreader described in U.S. Pat. No. 7,437,325may automatically re-quote the working order in one leg of a two-leggedspread based on the movements of the inside market in the other leg. Asdescribed above, the automatic spreader actively quotes in one or morelegs of the spread and for the example shown in FIGS. 2A through 2Cquotes in both legs. In accordance with the preferred embodiments of thetransaction toggler, however, an additional metric is considered priorto actively quoting in any of the legs. Specifically, prior to quotingin the legs of the spread, the transaction toggler determines theproximity of the corresponding working orders in the legs to the insidemarkets in the legs. If the corresponding working orders are not withina defined proximity limit to the inside market, then the transactiontoggler prevents the working order from being sent to the host exchange.Preferably the proximity limit may be defined by the user. In oneembodiment, the user may define separate proximity limits for the bidside and the ask side for each of the legs. The proximity limits may beset using a drop-down menu, a configuration window, such as the spreadconfiguration window described in U.S. Pat. No. 7,437,325, or in anyother manner.

The transaction toggler, therefore, provides several advantages to atrader using an automated trading tool. An example of a system andmethod for automated trading is provided in U.S. Patent Publication No.2003/0236737, published on Dec. 25, 2003, the content of which isincorporated herein by reference. Automated trading tools often timesquote at price levels that are relatively far away from the insidemarket, even when working orders at price levels that are not likely tobe matched. For example in FIG. 2C, a sell order is quoted at a pricelevel of 104.30, which is seven ticks away from the inside market. Thus,the user may accrue transaction fees from the host exchanges for quotingaway from the inside market at price levels where it is unlikely thatthe orders will be matched. In addition, many host exchanges place alimit on the maximum number of times that a trader is allowed to quotein one trading period, e.g., the host exchanges may impose transactionquotas. Traders who exceed transaction quotas may be assessed fines. Byconstraining working orders to falling within the threshold proximity tothe inside market, the automated trading tools may send fewer quotesand, those that are sent may be more likely to be matched.

In accordance with a one preferred embodiment, the proximity limit isdefined by the user, such as a trader, as being a pre-set number ofticks away from the inside market. FIGS. 3A through 3C illustrate theuse of a proximity limit defined as a number of ticks. FIG. 3Aillustrates a spread market, including a bid quantity column 302, aprice axis 304 and an ask quantity column 306. FIGS. 3B and 3Cillustrate the markets for the underlying tradeable objects, Product Aand Product B, respectively, for the two-legged spread shown in FIG. 3A.FIGS. 3B and 3C likewise include a bid quantity column 308, 310, a priceaxis 312, 314, and an ask quantity column 316, 318. It will berecognized that the information presented in FIGS. 3A to 3C may bereadily adapted for presentation in an interactive trading screen of thetype shown in FIGS. 2A through 2C. The preferred embodiments, however,are not limited to this or any other specific type of trading screen.Rather, the market information may be presented in any type of display,or it may not be displayed to a user at all.

In configuring the spread, the user has selected proximity limits, whichare illustrated in FIGS. 3B and 3C. For Product A, the ask proximitylimit 320 is set at two ticks and the bid proximity limit 322 is set attwo ticks. For Product B, the ask proximity limit 324 is set at one tickand the bid proximity limit 326 is set at 3 ticks.

An example of placing a spread order using a transaction toggler in thespread market of FIG. 3A will now be described. If a trader enters anorder in the spread market to buy 1 spread at price level 3, and activequoting is selected for both legs, the automated spreader will try towork two orders. Assume that, based on the spread configuration, one ofthe two orders is an order to sell 1 Product B at price level 10.Because the ask proximity limit 324 is set at 1 tick, and price level 10is not within that range, the transaction toggler prevents the order tosell Product B at 10 from being entered into the market, at least untilthe inside market shifts to fall within 1 tick from price level 10. Ofcourse, during that time, the inside market for Product A may move,resulting in a new order to sell Product B at a different price level,to which the proximity limit would again be applied.

In accordance with another preferred embodiment, the proximity limit isdefined by the user as being a pre-set cumulative depth away from theinside market. Cumulative depth, as the term is used herein, means thesummation of quantities (either bid or ask) between the inside marketand the price level at which an order is to be entered. If the depthbetween the inside market and the price level at which the order is tobe entered exceeds the cumulative depth proximity limit, then thetransaction toggler will prevent the order from being sent to the hostexchange.

For example, referring again to FIGS. 3A through 3C, in configuring thespread assume that, for Product B, the ask proximity limit is set to acumulative depth of 20 and the bid proximity limit is set to acumulative depth of 35. If, as before, a trader enters an order in thespread market to buy 1 spread at price level 3, and active quoting isselected for both legs, the automated spreader will try to work twoorders. Assume that, based on the spread configuration, one of the twoorders is an order to sell 1 Product B at price level 10. The cumulativedepth from the inside market to the price level 10 for Product B is 19(a quantity of 14 at price level 9 and a quantity of 5 at price level10). Thus, the transaction toggler would allow an order to sell IProduct B at price level 10 to be sent to the host exchange.

The transaction toggler described herein may be readily incorporatedinto a wide variety of trading applications by those skilled in the artand its functionality will typically be implemented in software and/orfirmware. Although the specific examples are provided in relation to anautomated spreader, the preferred embodiments are not so limited, butrather may be usefully applied to any automated trading application thatprovides for the automated submission of quotes.

In the examples provided above, the proximity limit is static, i.e., adefined number of ticks or a cumulative depth. The preferredembodiments, however, are not limited to a transaction toggler using astatic proximity limit, but rather any type of proximity limit may bedefined. For example, a proximity limit may be defined by an equationthat is applied to the trading application, either directly orindirectly, such as from a spreadsheet application. As just one example,a number may be scaled based on the volatility of the tradeable objectto define a proximity limit, so that the proximity limit is greater fora more volatile tradeable object and smaller for a less volatiletradeable object.

As a further example, a proximity limit may be defined based upon amarket for a different tradeable object, which may or may not be one ofthe legs of the spread in the automated spreader example. For instance,a trader who is setting a proximity limit for one tradeable object,Product C, may perceive the different tradeable object, Product D, as anindicator of the likely short-term performance of Product C. Theproximity limit for Product C may then be defined in any number of ways.

In one embodiment, the quote for Product C is translated into ahypothetical quote for Product D, in accordance with some relationshipbetween Product C and Product D that is defined by the user. Thetransaction toggler may then allow the quote for Product C to besubmitted when the hypothetical quote for Product D falls within thedefined proximity limit applied to Product D.

Alternatively, the proximity limit in Product C may adjust dynamicallybased upon the market for Product D. For example, if Product C andProduct D are the same tradeable object but they are traded at differentexchanges (in this case, Product C and Product D may be defined to havea 1:1 relationship), and the exchange at which Product D trades isperceived to be a deeper market, such that the price of Product C may beexpected to follow the price of Product D, and the proximity limit forProduct C is defined as two ticks, then the transaction toggler mayallow submission of a quote that is three ticks away in the market forProduct C if the quote is within two ticks in the market for Product D.

In yet other embodiments, a proximity limit is time-dependent. Forexample, the proximity limit may be set by a user to change inaccordance with the time of day. The time of day may effect a trader'swillingness to quote in a variety of ways. For instance, a trader maywant to apply a different proximity limit at the opening or at a timeduring the trading day when economic numbers are scheduled to bepublished. The trader may therefore define a time window during which adifferent proximity limit is applied. As examples, the proximity limitmay be set such that no quotes are submitted during the window, or theproximity limit may be removed during the window such that all quotesare submitted. Of course, the proximity limit may be set at any valuebetween these extremes. In another example of using a time-dependentproximity limit, the transaction toggler checks, before submitting a newquote, how long it has been since the previous quote was submitted. Forexample, the transaction toggler may prevent the submission of a newquote within, e.g., 5 seconds of the last quote.

Furthermore, other features may be associated with the transactiontoggler. For example, in instances where the transaction togglerprevents submission of an order to the host exchange, the user may beprovided notice by the trading application. In one alternative, the usermay be provided with the opportunity, after notice or without notice, tooverride the transaction toggler such that the automated orders will notbe blocked. As another example, the trader may be allowed to define,such as by a configuration parameter, a maximum number of times that anorder may be toggled on and off. For this example, the trader may definewhat happens if the order exceeds the maximum number of toggles. Onealternative removes the proximity limits when the maximum number isexceeded. In another alternative, the transaction toggler stops quoting.

In another alternative, the transaction toggler may respond differentlydepending upon whether an order has already been submitted to the hostexchange. For example, if an order has already been submitted thetransaction toggler may not toggle off when the previously submittedorder moves outside of the proximity limit. Alternatively, the order maybe cancelled if it moves outside the proximity limit and remains outsidethe proximity limit for a predetermined time. As a further alternative,separate proximity limits may be applied for i) placing an initialorder, and ii) applying to an existing order that moves out of range.

In addition, it should be appreciated that it is not necessary that theproximity limit be measured from the inside market as shown in theexamples. For example, the proximity limit may be measured from anotherreference point, such as the last traded price. Any other referencepoint of use to the trader may alternatively be used.

It should be understood that the foregoing description of the use of aproximity limit may be applied to any automated transaction, includingthe submission of quotes, orders and the like. Those skilled in the artwill recognize that the submission of a new quote or order may or maynot include a concurrent request to delete, cancel/replace or modify apreviously submitted quote or order.

Furthermore, it should be understood that the programs, processes,methods and apparatus described herein are not related or limited to anyparticular type of computer or network apparatus (hardware or software),unless indicated otherwise. Various types of general purpose orspecialized computer apparatus may be used with or perform operations inaccordance with the teachings described herein. While various elementsof the preferred embodiments have been described as being implemented insoftware, in other embodiments hardware or firmware implementations mayalternatively be used, and vice-versa.

In view of the wide variety of embodiments to which the principles ofthe present invention can be applied, it should be understood that theillustrated embodiments are examples only, and should not be taken aslimiting the scope of the present invention. The claims should not beread as limited to the described order or elements unless stated to thateffect. Thus, all variations that come within the scope and spirit ofthe following claims and equivalents thereto are claimed as theinvention.

The invention claimed is:
 1. A non-transitory computer readable mediumhaving instructions stored therein for causing a processor to carry outacts comprising: determining a price of an order for a first tradeableobject for a spread between a plurality of tradeable objects, the pricedetermined according to a spread price for the spread and an insidemarket for a second tradeable object of the spread; and initiatingsubmission of the order to an electronic exchange according to acomparison of the price to a price range.
 2. The non-transitory computerreadable medium of claim 1 where the acts further comprise determiningthe price range according to a proximity limit and a reference price. 3.The non-transitory computer readable medium of claim 2 where theproximity limit comprises a number of ticks away from the referenceprice.
 4. The non-transitory computer readable medium of claim 3 wherethe reference price comprises any of: an inside market for the firsttradeable object and a last traded price for the first tradeable object.5. The non-transitory computer readable medium of claim 2 where theproximity limit is user-selectable.
 6. The non-transitory computerreadable medium of claim 1 where the price range comprises a firstnumber of ticks greater than a reference price and a second number ofticks less than the reference price.
 7. The non-transitory computerreadable medium of claim 1 where initiating submission of the ordercomprises transmitting the order to the electronic exchange.
 8. Thenon-transitory computer readable medium of claim 7 where transmittingthe order to the electronic exchange comprises submitting the order inresponse to determining the price within the price range.
 9. Thenon-transitory computer readable medium of claim 1 where initiatingsubmission of the order comprises blocking the order from being sent tothe electronic exchange.
 10. The non-transitory computer readable mediumof claim 9 where blocking the order comprises preventing the order frombeing submitted to the electronic exchange in response to determiningthe price outside the price range.
 11. The non-transitory computerreadable medium of claim 9 where the acts further comprise: receiving auser-command to override blocking the order; and submitting the order tothe electronic exchange in response to receiving the user-command. 12.The non-transitory computer readable medium of claim 2 where theproximity limit is dynamic.
 13. The non-transitory computer readablemedium of claim 12 where the acts further comprise determining theproximity limit according to an equation.
 14. The non-transitorycomputer readable medium of claim 12 where the proximity limit isdetermined according to volatility of the first tradeable object. 15.The non-transitory computer readable medium of claim 12 where theproximity limit is determined according to a market for a thirdtradeable object.
 16. The non-transitory computer readable medium ofclaim 12 where the proximity limit is determined according to a marketfor the second tradeable object.
 17. The non-transitory computerreadable medium of claim 12 where the proximity limit is time-dependent.18. An automated trading tool for submitting orders to an electronicexchange, the automated trading tool comprising: a spreader configuredto determine a price of an order for a first tradeable object of aspread between a plurality of tradeable objects, the price determinedaccording to a spread price for the spread and an inside market for asecond tradeable object of the spread; and an order transmitterconfigured to initiate submission of the order to the electronicexchange according to a comparison of the price to a price range. 19.The automated trading tool of claim 18 where the spreader is furtherconfigured to determine the price range according to a proximity limitand a reference price.
 20. The automated trading tool of claim 19 wherethe proximity limit is user-selectable and comprises a number of ticksaway from the reference price.
 21. The automated trading tool of claim20 where the reference price comprises any of: an inside market for thefirst tradeable object and a last traded price for the first tradeableobject.
 22. The automated trading tool of claim 18 where initiatingsubmission of the order comprises blocking the order from being sent tothe electronic exchange.
 23. The automated trading tool of claim 19where the proximity limit is dynamic and is determined according to anyof an equation, volatility of the first tradeable object, a market foranother tradeable object, a market for the second tradeable object, andcombinations thereof.